Earned Value Management – Planned Value – Step 3

In earlier postings, the concepts of Earned Value (EV) and Actual Cost (AC) have been discussed. Earned Value is how much value is in the work already accomplished, and Actual Cost is how much money the work already accomplished has actually cost. The third term to understand is Planned Value (PV). PV is how much we estimate the value to be of the work that we’re planning to do. Another way of thinking about PV is the amount of money we’ve budgeted for the work scheduled at that point in time. The chart below illustrates the EV, PV, and AC for a ten-week project that is currently on week 5. PV should be estimated for the whole project at the beginning of the project. Note that the PV on the chart extends for all ten weeks, whereas we do not know what the EV or AC will be for that week until we get to that week, so those lines stop at week 5. At week 5, PV is $5000. So we budgeted to spend a total of $5000 by week 5. The AC for week 5 is $5,500, so we’ve spent $500 more than we had planned. The EV for week 5 is $5,200, meaning that the value of the work performed so far is worth more than we had planned it to be at this point in time. This all means that we’re a little over budget, but we’re also a little ahead of schedule.